Salinas Company has two service departments,Maintenance and Human Resources.Salinas Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while Human Resources costs are allocated based on number of employees.The following information has been gathered for the current year:
$\begin{array}{lllll}&&\text { Human }\
\text { Maintenance } & \text { Resources }& \text { Mixing } & \text { Finishing }\
\text { Direct costs } & \$ 126,000 & \$ 84,000 & \$ 105,000 & \$ 175,000 \
\text { Square footage } & 800 & 100 & 1,300 & 1,100 \
\text { Number of employees } & 20 & 12 & 28 & 32
\end{array}$
Assume the step-down method is used to allocate service department costs.Which department should be allocated first?
A) Maintenance
B) Human Resources
C) Mixing
D) Finishing

Question

Quizplus · Accepted Answer

The step-down method allocates service department costs starting with the department that provides the most service to other departments. In this scenario, without specific service provision data, the choice between Maintenance and Human Resources should be based on the nature of their services. Typically, Human Resources services are more universally applied across departments, including service departments, making it a logical first choice for allocation.

Salinas Company Has Two Service Departments,Maintenance and Human Resources Assume the Step-Down Method Is Used to Allocate Service Department